Understanding Your Utility Costs and Energy Consumption

Understanding your utility costs, and the different ways you spend money in energy consumption, are essential parts of our daily lives. The way we interact with our energy is entirely informed by our knowledge of it. Reducing your Energy consumption, by using it more intelligently, will directly reduce its costs, thereby saving you money, and giving you the opportunity to spend your money on other more important aspects of your business. The following are just a few, but major, ways in which your energy consumption costs you money each and every month.

Demand Charge

Your demand is a charged to you based on the highest peak of kw usage over a billing cycle, which is usually 30 days. This peak is found by an electric meter measuring the usage over 15 minute periods of time over the 30 days. Lets compare two hypothetical businesses and their usage, so that we can see how Demand Charges can directly impact your business.

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Business A, is open 8 hours a day, while business B is open for 24 hours a day. Both Businesses use 2,800 kwh a month. Business A operates at a constant demand rate of 350 kw through an 8 hour workday. Business B, operates at a constant demand rate of about 117 kw through a 24 hour workday. Even though their energy consumption was equal, Business A will have a higher monthly bill, due to their higher demand needs.

The Utility Company needs to be ready at all times to supply you with the Electricity you need, right when you need it. For this reason, you have a demand charge on your monthly bill. Understanding what causes higher demand, and finding ways to mitigate the demand, are essential to saving money on energy.

Energy Charge

Electricity is measured in kilwatt-hours, or kwh. One kwh is equal to one kw used consistently for a one hour period of time. The energy charge you encounter on your bill is for the most part, straight forward. It can have variability in the forms of different increments, such as the first 10,000 kwh will be charged differently than the next 20,000 kwh, and so on and so forth. This variability will be according to the agreement set forth by your local Utility Company. Kwh represents the total amount of electrical energy used during your billing cycle. Knowing your baseline kwh consumption, with all of the fluctuations it goes through during your monthly billing cycle, will equip you to more readily reduce your over all energy consumption, and in turn, save you money.


With water charges you have a base fee. Your base fee is for your meter and connection to the system. You then have a usage fee, based on how much water passes through your meter for the month. You will be charged monthly on what your usage is. Your usage charge will be per unit of water, which is 1 Unit = 1,000 gallons of water. During Summer months, your local Water Utility may also have peak rates that will add additional costs to what you use. Understanding when, and where you use water, is key to limiting the effects of peak rates during the hotter months of the year.

Natural Gas 

Natural gas is the cleanest-burning fossil fuel available to us. It is non toxic, and odorless. Utilities will add a non toxic odor to the gas to make gas leaks easier to detect if and when they happen. You are charged per Decatherm (Dth) of gas, a standard measurement of heat. One Dth is equivalent to one million British Thermal Units, or Btu’s. The amount of gas you use in a month can depending on a great deal of variables. Primary among these variables, are the time of the year and the appliances that need Natural Gas to function. During the colder months, natural gas usage will increase significantly due to people’s desire to heat their homes to a comfortable temperature.

Understanding your Utility Costs is essential, if you hope to be efficient with how you spend your money and the footprint you leave on the world. We all need to take steps to better understand our impact, and how we can improve the ways in which we consume energy, allowing a brighter future for our families.

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